Nearly half of tenants who renewed their apartment leases in Seoul this year exercised their contract renewal request rights as jeonse (lump-sum deposit lease) prices continued to rise, data showed.
An analysis of Seoul apartment jeonse and monthly rent transactions reported to the Ministry of Land, Infrastructure and Transport's real estate transaction system showed that renewal contracts accounted for 41.7% of all lease transactions this year, up more than 10 percentage points from 31.4% last year. The sustained rise in jeonse prices prompted more tenants to opt for renewals rather than new contracts.
The proportion of tenants using their contract renewal request rights surged to 49.3% this year from 32.6% last year. Nearly half of tenants who renewed their leases exercised the rights to cap rent increases at 5% or less. The usage rate of renewal rights in Seoul apartments had plunged to the 30% range in 2023 when reverse jeonse difficulties were severe, but has been rising again since the second half of last year as jeonse prices climbed.
Monthly rent increases outpaced jeonse price gains this year. According to Korea Real Estate Board's housing price trend survey, Seoul apartment monthly rent prices rose a cumulative 3.29% from January through November, exceeding the 3.06% increase in jeonse prices over the same period.
The widening monthly rent increases this year are attributed to expanded regulations including the October 15 measures, which increased rental demand while tighter mortgage regulations pushed more tenants to convert part of their higher deposits into monthly rent. The designation of all of Seoul as a land transaction permission zone and regulated area, which dampened the sales market, also contributed to the overall increase in rental demand.
"With expanded regulations from the June 27 lending restrictions to the October 15 measures making it difficult to trade up or move to better housing, rental demand is expected to increase and the shift to monthly rent will accelerate," said Yoon Ji-hae, head of the research lab at Real Estate R114. "We need to prepare for instability in the jeonse and monthly rent market as new housing supply will also decrease next year."
